By Angela Ma, Dezan Shira & Associates
BEIJING – Wholly Foreign Owned Enterprises (WFOEs) are able to repatriate funds out of China in a variety of forms, for which tax implications vary according to the form of repatriation used and the Double Taxation Agreement (DTA) in place between China and the recipient country. The four most commonly used channels for profit repatriation are dividends, loans, service fees, and royalties. While WFOEs can repatriate funds to an overseas shareholding company in any of these forms, it is important to note that funds may be repatriated using dividends or loans only if the recipient entity is a shareholding company of the WFOE. Continue reading
SHANGHAI – On February 28, the Shanghai State Administration of Foreign Exchange (Shanghai SAFE) issued the “ Notice Concerning Support for the Implementation of Foreign Exchange Administration in the China (Shanghai) Pilot Free Trade Zone” (Shanghai Huifa  No. 26, hereinafter referred to as the “Notice”). The Notice aims to simplify the process of foreign direct investment (FDI) and facilitates the management of capital accounts in the Shanghai free trade zone (FTZ) – a 28.78 square kilometer free-trade zone launched in 2013.
These reform measures move China one step closer to the liberalization of foreign exchange capital accounts and carry great importance for foreign investors with an eye on the Chinese market. Continue reading
HONG KONG – Passed by the Legislative Council on July 12, 2012 after a year’s-long process of deliberation and review, Hong Kong’s new Companies Ordinance (Cap. 622, “new CO”) went into effect on Monday of this week. The Ordinance consists of 921 sections and 11 schedules and is described in Hong Kong’s official media as addressing four goals: to enhance corporate governance, ensure better regulation, facilitate business, and modernize the law.
Overall, the Ordinance strengthens the position of shareholders vis-à-vis company directors and expands the powers of the Registrar of Companies, even while removing some bureaucratic obstacles to the smooth flow of business. It is hoped that these latter provisions will reduce some unnecessary costs of doing business in Hong Kong (see “Facilitating business” below) and further strengthen its position as a capital of international commerce. Continue reading
SHANGHAI – The new issue of China Briefing Magazine, titled Guide to the Shanghai Free Trade Zone, is out now and will be temporarily available as a complimentary PDF download on the Asia Briefing Bookstore throughout the month of March.
This year has seen some exciting changes in China’s foreign investment landscape as the government explores new ways to lessen previous restrictions on doing business in China. Most recently, the Shanghai Free Trade Zone (FTZ), seen as the testing ground of China’s economic reforms, has garnered a lot of attention. We along with many foreign investors are very interested to see what opportunities and benefits it will offer. To this end, we have been in close contact with officials in the Zone to learn about its establishment procedures and preferential policies available to various industries in the zone. Continue reading
By Chet Scheltema & Leonard Liu, Dezan Shira & Associates
BEIJING – Starting March 1, 2014, Beijing adopts new incorporation requirements for all companies, including for foreign invested enterprises, consistent with national reforms enacted in the legislation “Reform of Registered Capital Rules.” Beijing’s announcement follows similar pronouncements in February of other major Chinese municipalities such as Tianjin and Guangzhou and also in Zhejiang.
According to inquiries with Beijing authorities, foreign invested enterprises may now complete incorporation in Beijing and obtain a business license without needing to inject “registered capital” or complete capital verification. Old rules required that one installment be made within six months of obtaining a company’s preliminary business license or several installments within a two-year period and that such injection be formally verified. Also, the minimum invested capital requirement has been formally eliminated (except for enterprises operating in restricted or special industries). Continue reading
SHANGHAI – China’s State Council disseminated Order No. 648 (“Order 648”) last Friday in a move towards further implementing the recently revealed business registration reform scheme. The Order, signed by Premier Li Keqiang, abolished two administrative regulations pertaining to capital contribution requirements for Sino-foreign joint ventures, and revised eight regulations regarding capital contributions upon incorporation.
The revisions were made in order to bring these regulations in line with the new Company Law of China, which removed the registered capital requirements for company establishment and replaced the paid-up capital registration regime with a subscribed capital registration regime. Both the Company Law and Order 648 came into force on March 1, 2014.
SHANGHAI – After long consideration, China’s Ministry of Human Resources and Social Security (MOHRSS) promulgated the “Interim Regulations on Labor Dispatch” (MOHRSS Order No. 22, hereinafter referred to as the “Interim Regulations”) recently, which will come into force on March 1, 2014. As the first comprehensive labor dispatch regulation at the country’s Ministerial level, the Interim Regulations introduce several changes to the current rules and will present challenges in human resource management for foreign invested enterprises in China. Continue reading
Minimum Registered Capital Requirements To Be Abolished
SHANGHAI – To further lower the requirements for registering new businesses in China, the State Council, China’s cabinet, recently revealed their scheme for the reform in business registration. The scheme is a vigorous move in executing the objectives determined in the Third Plenum last year to establish an open and competitive market. Decisions made in the Third Plenum after the enthronement of a new leadership in China usually serves as an indication of how the country will be led for the next decade.
China amended its Company Law at the end of 2013. The new law will remove the registered capital requirements for company establishment, replace the paid-up capital registration regime with a subscribed capital registration regime, and will remove the minimum cash contribution requirement. The new Company Law will come into force on March 1, 2014. Continue reading